MIS Case Presentation Group 3 July 23, 2001

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MIS Case PresentationGroup 3 July 23, 2001

• Brian Buckham
• Xiangrong Cheng
• Muriel Furtado
• Ryan McNeice

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Part 1 The Set-Up
Frito Lays Mission Statement To become the
worlds favorite convenience fun foods
company.
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Frito-Lay, Inc. Facts

• 30,000 employees nationwide.
• 12,000 person sales force.
• 750,000 sales calls weekly.
• 41 manufacturing plants / 26 states.
• 30,000 packages of snacks per minute.
• 2.3 Billion lbs. of potatoes a year.
• 775 million pounds of corn.

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Problems

• William Korn resigns Dec. 1986 when profits
  plummet.
• What led to Korns resignation?
• Micromarketing strategy brought Frito-Lay to a
  halt.
• New strategies, but no management,
  organizational processes or information
  systems to support changes.
• Old decision making processes, even though
  they had implemented new strategies.
• -Paper based processes.
• -Hierarchical management control systems.

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Procedural Problems

• New products went stale when salespeople realized
  products werent selling.
• Promotional information hit salespeople long
  after warehouse inventories were increase.
• However, promotions would also come and go and
  inventories were never increased.
• The problem was not with the strategy, but lack
  of new mind-sets, process controls, and
  information systems necessary to enable the
  success of micromarketing.

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Solutions at Frito-Lay, Inc.

• January 1987 Michael Jordan, CEO of Pepsi
  Worldwide Foods, takes over.
• Returned Frito-Lay to a national pattern of
  decision making strategy.
• Reinstated tight control of strategy execution.
• Immediately abandoned the micromarketing
  strategy.
• Returned decision rights, promotions,
• product mix to corporate headquarters.

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Key Accounts/Small Customers

• Jordan understood the necessity of understanding
  the key accounts and small customers.
• Jordan maintained the segmentation of the work
  force.
• Proceeded with the implementation of the HHC
  (Hand Held Computers) and information systems.
• Reaffirmed Frito-Lays need for change the
  correctness of the original micromarketing
  strategy.

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New Strategy, Refocus, Lessons Learned

• Vision for change had to be corporate wide.
• Hybrid of Centralization Decentralization
• IT would need to support centralized control
  decentralized decision-making, but would need to
  come before organizational re-engineering.

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1987-1989Jordan Senior Management Implement
Initiatives

• Improved productivity gained control of
  operations.
• Targeted at understanding the business,
  redesigning work, productivity quality within
  these areas.
• End of 1989, shifted towards integrating,
  streamlining time synchronizing operating
  processes.
• Integrated the IS to allow line employees and
  managers to access timely relevant information
  for micromarketing strategy.

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Functional Redesign

• Early 1987 Jordan divides domestic corp. into 32
  geographic areas called Frito-Lay Market Areas
  (FLMA).
• Memos developed, issuing approximate costs,
  revenues, contribution to profit.
• Memos allow Jordan to focus on the 10 worst
  FLMAs.
• Refocus in Manufacturing Logistics from
  1985-1989 leads to additional 500m to bottom
  line.
• HHC (Hand Held Computer) were a large part of
  this overall success.

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HHC Rollout, 1987

• Los Angeles was prototype site.
• 1986 Best Sales Organization (BSO) Award.
• July 1988 rollout was complete (6 months ahead of
  schedule).
• Jordan asks for 1 sales commitment.

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Part 2 Infrastructure Development

• The Business Cycle
• Organizational Redesign
• Fine Tuning and the Information
• Infrastructure
• Affects of IT
• Where to next?

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A Framework for Organization Design Assessing
Organization Effectiveness
Defining Direction and building infrastructure
Executing and Adapting
Creating and Sustaining Value
Value creation
Environmental Context and Resources
Units, groupings
Society and government loyalty
Partnter loyalty
Incentives
Coordinating mechanisms
Authority
Formal and informal power

Decisions and actions
Customer loyalty
Employee loyalty
Purpose Core Values, Core Competencies
Boundary systems
Strategy
People
Values and Behavior
operation, processes
Control
Work
Management processes
Organizational capabilities, resources, and
leadership
Technology
Shareholder loyalty
Information and communication infrastructure
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• Defining Direction
• How should the organization be designed to
  satisfy our core values, utilize competencies,
  and build on our information capabilities?
• Executing and Adapting
• -How do we build control mechanisms, authority
  structures (org. design), and culture in our
  organization?
• Sustaining Value
• -In what ways can we utilize our infrastructure
  and capabilities to grow in the marketplace?

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Building the Infrastructure

• Two types of information would be needed to
  support the organizations new strategy
• Improved information was needed to enable the
  company to streamline, integrate, and
  time-synchronize operating processes
• Redesign management processes
• structures,
• systems,
• decisions,
• that controlled and coordinated operations.

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This resulted in the creation of the Pipeline
Project and Management Support System Projects

• These projects were initiated to support the
  activities that contributed to redesign
  activities within and across functional units.
• The major goal
• To redesign operations (and the information
  supporting them) across the business rather than
  attempting to optimize each function.

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Linking the Organization
The goal was to use information technology to
link each area of the company.
In effect, they were removing traditional
departmental barriers and improving
cross-functional information exchange.
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So, what would be the goal of the reorganization?
STRATEGIES
POLICIES
ORGANIZATION
INFORMATION TECHNOLOGY
INTEGRATION!
Dr. Chen, Information, Organization and Control
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• Streamlining the business cycle involved
  simultaneous redesign of both organizational and
  management processes
• Core Operating Processes the primary activities
  through which the organization designs, produces,
  markets, sells, distributes, and supports its
  products.
• Management Processes set of activities through
  which an organization manages core operating
  processes.

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Redesigning the Organization

• Reorganized into four regional offices known as
  Area Business Teams (ABTs).
• Passed responsibility onto the area managers,
  effectively creating a more horizontal
  organization with greater control of its
  activities. This allowed better information
  exchange among the organization.
• Corporate structure was significantly altered.

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• The traditional annual planning cycle was
  eliminated in favor of a trimester planning
  cycle.
• The annual operating plan was formulated in the
  third trimester.

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Frito Lays Planning Cycle
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Performance Evaluation

• Traditional
• Functional expenses
• Sales revenue
• New Systems
• Area-wide congruent profit objectives
• Encouraged free-thinking and innovation
• Focus on dollar volume AND budgeted expense
  targets.
• Highlighted the use of IT for cost-tracking and
  reporting.

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• Performance monitoring was also altered to focus
  on districts and ABTs. The reports were
  generated electronically and sent directly to the
  off-site headquarters.
• This allowed for weekly meetings at all levels
  (ABTs, Districts, and Headquarters) for better
  decision-making.
• Each ABT had an area manager with the authority
  to develop systems relevant to his or her area to
  control the transition, and these systems fed
  directly into the networked system.

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Product Delivery

• Traditional methods required 7 days out of a 35
  day product life-cycle.
• New systems (PDD and TDD) resulted in one to
  two-day delivery. This was accomplished by
  bypassing warehouses, and relied on accurate,
  real-time information transmission through the
  distribution channels.

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Finance Repercussions

• The restructuring and reorganization resulted in
  new needs for information.
• What good is a PL statement when you can
  observe it as an outcome but not understand its
  causes?
• The finance system changed from giving profit
  summaries to providing information on profit
  tradeoff decisions.
• This was a transformation from reporting outcomes
  to building a path from early warning symptoms to
  causes to response.

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Tuning the Information Infrastructure

• One of our biggest assets was our information,
  and one of our biggest liabilities was our
  information.
• Area Information Managers (AIM) moved out from
  central offices to ABTs to assist managers with
  data-related concerns.
• Managers were being taught how to use the
  information they were gathering to make
  decisions. After all, this is the ultimate goal
  of information.

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The 1991 Restructuring
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• What was the most appropriate structure for Frito
  Lay?
• Business teams increased from 4 to 22.
• Four segments with respective decision rights
  (down from 6).
• Decision rights were moved once again, resulting
  in a more decentralized organization. What were
  the advantages?

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The Primary Lesson

• RATHER THAN FOCUSING ON INDIVIDUAL BUSINESS
  UNITS, LOOK AT THE ENTIRE MARKETPLACE AND THE WAY
  IT INTERACTS WITH THE COMPANY.

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Where to from here?

• Restructuring alone will not solve problems.
  Once Frito Lay had developed an organization
  built around information sharing and cooperation,
  and learned how to use information at the right
  level to make decisions, it was time to further
  fine-tune the MIS programs. This included the
  launch of new and more timely information
  gathering, analyzing, and reporting systems.

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Creating and Sustaining Value
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Frito Lays Marketing Strategies

• Aggressive advertising
• Diversifying into new markets
• Product differentiation
• Packaging
• Innovative tactics
• Entering new market niches

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Global Market Penetration
                                               
               ltgt
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MIS Tools

• Electronic Data Interchange (EDI)
• Direct Exchange (DEX)
• Management Reporting Systems (MRS)
• Executive Support System (ESS)
• Decision Support System (DSS)
• Packaging Application Expert (PAX)
• Consumer Community Portal (CCP)

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What is EDI ?
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EDI Process Model
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EDI's Unique Attributes

• EDI is independent of trading partners'
  internal computerized application systems.
• EDI interfaces with internal application
  systems rather than being integrated with them.
  
• EDI is not limited by differences in computer
  or communications equipment of trading
  companies.

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EDI Benefits

• Reduction of Paper Work
• One-time data entry
• Reduced errors, improved error detection
• On-line data storage
• Faster management reporting
• Reduced clerical workload and phone chatter
• Higher productivity without increasing staff

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EDI Benefits

• More timely communications
• Rapid exchange of business data
• Elimination of mail charges, courier services
• Reduced inventory safety stocks
• Improved production cycle
• Standard communications
• Customers
• Suppliers
• Banks and financial institutions

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What is DEX ?
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DEX Process Model
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DEX Benefits

• Retailer
• Capitalizes on the use of the DSD system
• Closes the loop for inventory management
• Provides opportunities for administrative cost
  savings
• Joint
• Reduces check-in time
• Enables electronic billing and remittance
• Reduces charge-backs for unauthorized items, Pas
• Supplier
• Reduces sales ticket errors
• Avoids manual entry into DSD system

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Additional MIS Tools

• Management Reporting Systems (MRS)
• Executive Support System (ESS)
• Decision Support System (DSS)
• Packaging Application Expert (PAX)
• Consumer Community Portal (CCP)

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Frito Lays Financial Performance
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Recommendations

• Continue fine-tuning information systems for
  better decision-making.
• Develop new information/decision-making systems,
  ensuring they can be integrated into current
  systems.
• Continue building systems that can process the
  unique database Frito Lay has created must be
  value-added.
• Develop and implement training programs (both
  employees and suppliers)
• shared incentive programs
• shared purpose
• top-to-bottom implementation programs
• Continue to focus on value-chain activities and
  buyer-supplier relationships.
• Industry acquisitions for further top-line
  growth.
• Finally, modification of strategic initiatives to
  form a fit between front-line employees and
  customers and information dissemination.

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Questions or Comments?
THE VISION
THE RESULT